As a Dallas bankruptcy lawyer, I face clients each day that carry a lot of fear over the bankruptcy process. While filing either type of bankruptcy can be scary for anyone, Chapter 7 does have some additional considerations that tend to make people shy away.

It is difficult to qualify

Many people have heard that the new bankruptcy laws make it more difficult for people to qualify. While this is true to an extent, it doesn’t mean that people should stop trying. When the bankruptcy laws were changed in 2005, they implemented a rule that requires a potential filer to pass a means test. This test compares the filer’s income to the median income level of the state. If the filer’s income is less than the median income of the state, they are eligible to file for Chapter 7. If the filer’s income is greater than the median income level of the state they will not automatically qualify for Chapter 7, but will need to demonstrate that their disposable income is less than the income needed to sufficiently repay their debts.

I will lose my assets

It is common knowledge that many creditors hold repossession or liquidation rights over some of a debtor’s assets. Similarly, most people are aware that this risk is significantly diminished when filing for Chapter 13 because of the repayment plan. This does not mean that filing for Chapter 7 increases the risk for losing assets. In fact, bankruptcy exemption laws protect much of a debtor’s personal property when filing bankruptcy, regardless of whether the case is Chapter 7 or Chapter 13. In most situations, a person’s house, car, accounts and much of their personal property will be exempt from liquidation in bankruptcy.

My credit will be ruined

The fear of credit damage is one of the most commonly cited reasons against filing for bankruptcy. The truth is that filing either type of bankruptcy cannot directly damage credit. What causes the damage to a credit standing is delinquent accounts and missed payments, which are the most common occurrence before any bankruptcy filing. While a Chapter 13 bankruptcy may provide for faster credit recovery, a Chapter 7 does allow a debtor to begin the credit rebuilding process as well.